Who's entitled when it comes to title insurance?

Mike Holmes (file photo).

Photograph by: Handout
, The Holmes Group

There's a lot of confusion about title insurance. Some people call title insurance the "surprise" insurance because they assume it covers any surprises with the property they're buying. It's only when there's a problem that homeowners actually check what their policy covers. By then, it's too late.

What does title insurance cover? Does it cover structure, hidden things in the basement, leaks? How many homeowners ask these questions before buying any insurance related to their home? Not enough, I can tell you that much.

Most people buy title insurance when they purchase a home. But it's not required in Canada. It's meant to protect homeowners from perils such as title fraud, unpaid liens, encroachments from neighbouring properties - anything that can challenge the ownership of your home, or anything related to the title of your home. It also covers losses related to the title or ownership of the property. But it's not a home warranty or home insurance policy.

Every insurance policy is different. And, as the insurance company makes up the rules, do you think they play to lose?

For instance, most insurance companies don't cover a leaking foundation. Why? Probably because almost every single foundation leaks. Insurance companies would go bankrupt if they covered leaking foundations. That's why they make the rules on what they will and will not cover. That's just smart business. So you need to be smart too.

You pay for title insurance for a reason. But too many homeowners aren't clear on what that reason is. And that can lead to a lot of trouble.

Let me give you a scenario: A couple bought title insurance on an old house that had been renovated. They discover the renovation was done wrong and now they've got over $100,000 worth of repairs on their hands. Their title insurance policy says it covers any losses related to work done on the house without permits. But in this case, there were permits on the work.

Permits mean the work was inspected by a city building inspector. If the government comes in and signs off on a job they're saying everything's been done properly to minimum code. It puts responsibility on the government because the work was passed by the city inspector. So now the title insurance company is asking for the city to issue a work order. Why? Because the work order makes the city liable.

When the city issues a work order - sometimes called an Order to Comply - to a homeowner, it usually means some part of their home needs to be brought up to minimum code. And there's the problem. The city passed the work. But the title insurance company is asking them to say - in writing - the work is wrong and needs to be fixed.

When something's wrong with a job that has been passed, we've got a big problem. Title insurance isn't going to pay for repairs because permits were pulled on the job-and they were passed. The government isn't going to come back because it doesn't want to be liable. Who's going to pay? No one.

Who's at fault? Is it the homeowner who got the renovation? Is it the contractor that was hired? Is it the title insurance company, the building inspector, or the government? As far as I'm concerned, it's all of the above.

Bottom line, some homeowners do what they are supposed to do. They get a home inspected before they buy it. They look into past renovations and ask if there were permits pulled. They buy title insurance. But when there's a problem who gets stuck holding the bill? They do. Is that right?

The only way to get around this is to ask plenty of questions about what your title insurance covers. You need to know what it covers (and doesn't cover), up to how much and for how long. Also find out if you can pay extra to make sure it covers everything.

It might be just a thousand bucks more, but I'd pay a thousand dollars for that extra insurance. Or you might need a different type of insurance altogether.

Before you buy title insurance talk to a lawyer and the title insurance company. Make sure you understand what you're getting.

When you buy the most expensive investment of your life - a home - it's your problem. No matter what, the responsibility is always left in your hands.

You need to make sure the insurance you get does what you need it to do. No one else will make sure for you.

Energy costs are increasing every single day. If you want your home to be energy efficient, proper insulation installed the right way is the way to go. It pays for itself. Not many things in the home do.

Catch Mike Holmes in his new series Holmes Makes It Right Tuesdays at 9 p.m. on HGTV. For more information, visit hgtv.ca. For more information on home renovations, visit makeitright.ca.

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